Melissa Mentele and New Approach South Dakota want to legalize, regulate, and tax marijuana to reduce prison costs and boost funding for schools, drug education and addiction treatment, law enforcement, and the general fund. Their proposed initiative includes no end dollar figure, but I’ve previously estimated that if legalized marijuana sold as well here as it does in Colorado, then, factoring in our smaller population, South Dakota might make $19.6 million a year in taxes from marijuana sales.
Let’s update that estimate by factoring in the percentage of marijuana users, the likely customers who would pay that marijuana tax.
According to 2014 data from the National Survey on Drug Use and Health, as reported in the Lincoln Journal Star last January, South Dakotans are less likely to use marijuana than almost anyone else in America. Among South Dakotans age 12 and up, 9.41% reported using marijuana in the past year, and 5.14% reported using marijuana in the past month. Colorado and Washington report far higher rates of marijuana use:
|age 12+ report using marijuana in past year, 2014||20.05%||18.32%||9.41%|
|age 12+ report using marijuana in past month, 2014||14.01%||12.74%||5.14%|
|population age 12+, 2014||4,522,756||5,992,151||709,417|
|population age 12+ using marijuana in past year||906,813||1,097,762||66,756|
|population age 12+ using marijuana in past month||633,638||763,400||36,464|
Legalizing marijuana does not clearly drive higher usage rates (evidence here and here). One new study found increased post-legalization marijuana use among Oregon college students, but the effect occurred primarily among binge drinkers. (Tangent bait—which one is the gateway drug: marijuana or alcohol?) To stick with the data we have and keep the math simple, let’s assume higher usage rates drive legalization… which would mean that legalization in South Dakota is far less likely than in other states.
But if the unlikely happens, how much money could we get, given current consumption habits?
|Colorado||Washington||SD yearly revenue à la Colorado||SD yearly revenue à la Washington|
|tax per past-year user||$232.04||$286.80||$15,490,169||$19,145,710|
|tax per past-month user||$332.08||$412.42||$12,108,934||$15,038,379|
The average tax collection from each person who used marijuana over the past year was $232 in Colorado and $287 in Washington. More frequent marijuana users may be paying $332 a year in Colorado to $412 a year in Washington just in taxes for their highs.
Depending on how South Dakota users’ purchases would compare to their counterparts out of state, factoring in our lower user rate, South Dakota might bring in between $12.1 million to $19.1 million per year by legalizing and taxing marijuana.
Of course, neither Mentele nor Mickelson will make a dime off me, since I decline to waste my money or lung tissue on sticking smoldering weeds of any flavor in my mouth and breathing in the fumes and particulates. But it’s interesting to see both the Republican Mickelson and the Democrat Mentele seeking to tax unhealthy behavior to the tune of millions of dollars to fund education.